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Is FCAMX a Strong Bond Fund Right Now?

If you have been looking for Muni - Bonds funds, it would not be wise to start your search with Franklin California High Yield Municipals A (FCAMX). FCAMX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify FCAMX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

Franklin Templeton is responsible for FCAMX, and the company is based out of San Mateo, CA. The Franklin California High Yield Municipals A made its debut in May of 1993 and FCAMX has managed to accumulate roughly $1.25 billion in assets, as of the most recently available information. The fund's current manager, John Wiley, has been in charge of the fund since May of 1993.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 3.98%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 3.31%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, FCAMX's standard deviation comes in at 5.99%, compared to the category average of 10.57%. Over the past 5 years, the standard deviation of the fund is 5.62% compared to the category average of 9.74%. This makes the fund less volatile than its peers over the past half-decade.

FCAMX carries a beta of 1, meaning that the fund is volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.83, which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, FCAMX has 27.38% in high quality bonds rated at least 'AA' or higher, while 35.89% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of BBB, and focuses on medium quality securities.

However, it is worth noting that 28 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FCAMX is a load fund. It has an expense ratio of 0.65% compared to the category average of 0.82%. FCAMX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $1,000, while there is no minimum for each subsequent investment.

Bottom Line

Overall, Franklin California High Yield Municipals A ( FCAMX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

This could just be the start of your research on FCAMXin the Muni - Bonds category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.


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